Archive for the ‘Recession’ Category

The Washington Post recently had an article that started with “The overwhelming majority of Americans still make more money than their parents, but upward mobility is elusive for many…” It also said, ” The chances of moving from the bottom of the income spectrum to the very top is only 4 percent.”

Let me get this straight. We are supposed to be upset by these numbers, but it tells me that in a typical first grade class of twenty-five students in “the bottom of the income spectrum” that one of the students would move to the “very top.” That’s really not bad, considering what these children have to contend with. I believe most people growing up with parents in the bottom of the income spectrum have the following problems:

1. No role model of successful parents, particularly parents who work hard within the system to earn a lot of money.

2. No one at home who can help them do their school work..

3. No money for a college education.

4. More likely poorer than average health, due to lack of medical care, starting with the mother during pregnancy and including less dental care.

5. Uneducated parents who do not teach them many things that educated parents teach their children, such as a love of reading.

Ignore the well known fact that their is a correlation between the intelligence of children and the intelligence of their parents. It isn’t a perfect correlation, but it’s there. Children at the bottom of the economic scale start with many other obstacles, some of which I’ve listed. One in twenty-five makes it out of poverty into wealth? That’s not bad.

First, make the social security tax be on all income, not just salary. This would add to the revenue stream immediately.

Second, eliminate the cap on the income. As income goes beyond the maximum to contribute, which is about $110,000 per year, Social Security is still collected. No matter how much income someone has, social security is taken from all of the income. However, a person who contributes twice as much to social security doesn’t get twice as much income. He gets one and a half times the income, and further contributions would lead to a lower rate of return. People would still get something from the additional money, but not a proportional amount. This would mean the NFL player who goes broke later in life can still look forward to a reasonable amount of income.

I have no idea as to whether this would solve the problem, but it would help.

I have many students who behave in ways in class that would get them fired in any well run business. Some aren’t there when they are supposed to be, either arriving late, leaving for long periods of time during class, or missing class entirely. Many don’t do the assigned work. A few cheat. These students generally flunk, and aren’t really the problem. I’m wasting my time with them, and they are wasting their time in school, but they will eventually flunk out or shape up.

There is another category of student that is harder to deal with. It is the student who appears to work, but doesn’t learn anything. I wonder how they got into my class, because their skills are so poor, I can’t imagine them passing the prerequisite course. The online homework is attempted, they come on time, they pay attention, and work in class. But in Intermediate Algebra, they haven’t learned elementary school math. Four times one-fourth? Three times seven? Two numbers whose product is forty-eight and whose difference is two? They simply don’t know.

I don’t grade on effort, but on results. It bothers me more to give an F to a student who worked hard than one who didn’t, but I give the F.

A study was reported in today’s Washington Post, claiming that many people with middle class parents were not in the middle class. One of the criteria for moving down was they were below the 30th percentile in income. There were other criteria that would make them considered downwardly mobile, but I’m only going to look at this one. Middle class was defined as the middle 40 percent of income: people whose incomes were between the 30th percentile and the 70th percentile.

This is a relative scale. If everyone’s income were increased by $50,000 per year, the bottom 30% will still not be middle class. This means that for everyone whose income dropped below the 30th percentile, someone else moved up. Percentiles don’t look at an absolute scale. If everyone in the US were put in a line by income, taking people out of the middle 40% and putting them further back in line invariably moves other people up. Using the same data, the change in percentile of middle class people, one could equally argue that the lower class people are moving up.

And both your parties, and both the executive and legislative branch of the government. Find some kind of compromise. Raise the debt ceiling. Both sides are intransigent, and not only will the American public suffer if some kind of agreement is not reached, but potentially the whole world. I can’t believe how irresponsible the government is.

For the past couple of weeks, the debt ceiling crises has been a major news story. One story I’ve heard repeatedly is how it is going to effect everyone by the increased interest rates. The story goes on about credit card debt, car loans, and mortgages. News flash: not everyone is in debt.

A quick Internet search found a conflicting figures (of course.) Taking the middle number of three, 20% of American adults are not in debt. They not only don’t have credit card debt, they don’t have mortgages or car loans. Twenty percent is a large enough percent so that the talk about how everyone is going to be affected seems like an exaggeration. Another website said that more than half of Americans have no credit card debt.

I realize there are indirect effects. If business has to pay higher interest, prices will go up. But this is not what the commentators are telling us. Television news is increasingly watched by older people. Advertisers know this: just look at the ads. Older people are more likely to have paid off their mortgage and sensible people decrease their debts before retiring. Are those who write the news stories aware that so large a percent of their audience is not included in the “everyone” they are talking about?

My husband has commented when watching the news that he hopes the interest rates go up, because we are getting miserable returns on CD’s.

When an employer offers health care, there are difficulties. Health care costs have increased much faster than inflation, and there is no way that most employers can offer the same level of benefits without increasing their costs. Unless times are very good, the increase in cost has to be passed to the employee.

Pensions are a different matter. One of the considerations in accepting a job can be the pension. To tell an employee that his years of service is not going to give him the pension that was part of his employment package, is breaking a promise. The federal government, in both the military and civilian branches, got around this problem honestly. They decreed that all new people would be under a different system. So far, they’ve kept their pledges to those in the old system.

Wisconsin is trying to break their promises, and should follow the model of the federal government. All new workers would be under the new system. I believe in today’s economy, they would have no problems finding new workers. It wouldn’t solve the immediate problem, but rescinding the recent tax cuts might do that.

About fifty years ago, my grandmother told me that there is no point in concealing anything that is available in public records. For example, counties allow people access to records to find how much people paid for their home. Then it involved a visit to wherever the records were kept, but it was available. Now most of that information is on the Internet and can be found in minutes.

Now a surprising amount of information is in the public records and can be found with very little effort. I checked sales history of all seventeen of the apartments in our building. Our apartment is too big an investment for us to be ignorant of what is going on around us.

With the economic downturn, the question I have to ask is not “What did you pay for your house?” but “What is your house worth?” That is a harder question to answer, and sadly, it is a lot less than what we paid for it.

My husband’s parents lived frugally. He worked in a meatpacking plant and she took in sewing, but I have never seen anyone else live so well on so little. They turned their backyard into a huge garden and canned or froze all of their vegetables. What they didn’t use they gave away strategically. When their neighbors went fishing, my in-laws were given fish. The sewing machine repairman serviced her machine for “free.” There was no formal barter system, but the returns were noted.

They were careful of money. They paid off their house early and never used credit cards. Lunches were carried and vacations were often camping. I don’t live that way, but I recently cut up a piece of paper so I could use the back for my shopping list. The other pieces are clipped to the refrigerator for future use. I may not become my mother-in-law, but I am imitating one of her frugal habits.

I know someone who recently bought a car which costs over $45,000 new. I don’t know if his car was new, but it could not be cheap. He was laid off last year and unemployed for about three months. His new job pays less than his old job, but obviously it pays pretty well, although he took out a loan to buy the car.

Another man I know drives a two-seater sports car. He has a wife and child, which means the car does not have space for his family. If his wife’s car breaks down, this car is not a viable backup. This would be fine if he were financially secure, but he also was unemployed for several months.

I don’t understand car buying. To me a car is a means of transportation. I want it to be safe, reliable, comfortable, and inexpensive. I hate debt, and if I need a loan to buy a car, I’m buying too much car. I’m at retirement age (although not retired) and should not carry any loans into retirement.

Why are fancy cars so important to these people? Are they trying to impress people? They only impress me by their extravagance. I would think the pleasure of an expensive car would disappear within a few months. As for me, I drive a Kia Rio and it’s paid for.